MARKETING
Beckman Division Switches to Direct Sales Scientific and process instruments division terminates 28 dealer franchises in U.S. and Canada The 28 instrument dealers in the U.S. and Canada who held franchises from Beckman Instruments' scientific and process instruments division received 90-day termination letters from the company last week. The division switched to direct sales July 1, and Beckman salesmen made their first calls that day. At the current sales level, Beckman has thus shifted about $20 million in annual business from dealers to its own salesmen. The division's line includes a range of laboratory instruments: gas chromatographs, ultraviolet spectrophotometers, pH meters, oxygen analyzers, and the like. It will include also two products formerly sold through dealers by the company's Spinco division: an ultramicro system for use in blood chemistry and a clinical electrophoresis system. These two account for about $2 million of the $20 million figure. The division will continue to sell through dealers outside the U.S. and Canada. Language and other problems, it feels, make this the best policy. Customers who buy in the U.S. and Canada for shipment overseas, however, will deal directly with Beckman salesmen. The company plans no marketing change for the division's process instruments, which are sold both directly and through major recorder companies as parts of larger instrumentation systems. Also, Beckman's Berkeley, Offner, and Helipot divisions will continue to sell through manufacturers' representatives, as in the past. Reasons. Why the new program? Joseph W. Lewis, Jr., v.p. and manager of the scientific and process instruments division, says it was dictated by the growing complexity of the products and their uses. This situation, he says, makes direct manufacturer-customer contact a necessity. Behind the move also is the feeling that the division's sales have not been growing as rapidly as they should. Sales come to about 2 5 % of Beck30
C&EN
JULY
8,
1963
Joseph W. Lewis, Jr.
Roy F. Brown
He's been on the go
A busy day July 1
man's gross (estimated at $80 million for the fiscal year ended June 30). Beckman cites also the fact that some of its dealers have expanded their lines to the point where they are also selling competing instruments. Furthermore, the company feels that it can provide better long-term instrument service than its dealers. This is despite the fact that the modern instrument dealer normally has an integrated operation that is equipped to provide customer service. The Beckman move seems certain to be a severe blow for many of the division's dealers. Franchises will be terminated Sept. 30, and the company will not accept return of dealer inventories. Dealers have been operating under one-year franchises (renewable each October) with 90-day termination clauses. Beckman says it will abide by the terms of these franchises through Sept. 30. Thus the affected dealers will be selling against Beckman salesmen until then. Some observers in instrument marketing believe that Beckman will find itself in a tough, new world. The
costs of inventory, distribution, and service are rising, they say, and a large number of salesmen is required to achieve anything like the market coverage that can be maintained through dealers. For such reasons, Fisher Scientific, for one, finds the Beckman step "surprising." Fisher, both a manufacturer and a dealer (with a Beckman franchise), suggests that Beckman may find it difficult to service today's complex instruments without a dealer network (almost the direct reverse of the Beckman argument on this score). Perkin-Elmer, which competes with Beckman in many of its laboratory instrument lines, has used dealers "selectively" both in the U.S. and abroad. The company says it intends to continue to do so. Beckman feels strongly enough about its new marketing strategy to have poured $2 million into it through June 30. This nonproductive investment cut into fiscal 1963 earnings, and the change in tack is expected also to affect earnings for this fiscal year. In the next five years, however, Beck-
man expects the switch to produce heavy gains in both sales and return on investment. Expected sales growth is not tied to price increases, since none are contemplated as a direct result of the move to direct sales. Whatever the outcome of the Beckman decision, it has h a d divisional manager Lewis on the go since last fall, when Beckman's board of directors approved the plan. On the go also has been Joe Lewis' marketing manager, Roy F . Brown, who was looking forward, not without trepidation, to spending a busy July 1 on the telephone. Target. Others in the division, and elsewhere in the company, have been busy, too. The entire effort was pointed toward July 1, on which date the scientific and process instruments division was to be fully manned, fully stocked, and ready to sell. Secrecy was not easy to maintain. Since last fall, the division has hired and trained (for nine weeks) 83 sales engineers to augment the 21 already on the payroll. It has hired and trained (for 12 weeks) 131 field service men to augment the existing 42. In the same period, Beckman has established and stocked 10 warehouses in addition to the home-office warehouse at Fullerton, Calif. It has set up 33 new field offices, including a fourth applications engineering facility and district sales office at Houston. (New office equipment alone came to about $338,000.) Finally, the company has equipped 12 complete instrument repair facilities. One immediate problem the division faces is the loss of dealer prospect lists. As a partial effort toward building its own list, the division has put its present 70,000-name mailing list on magnetic tape. From this tape a Univac I I I computer (rented from Remington Rand on a 12 month contract) will extract specific groups of names for pinpoint mailings. The company hopes to have 100,000 names on the list by the end of this fiscal year and plans 44 mailings in the next 12 months. All-in-all, founder Arnold Beckman's 28-year-old company is putting a massive effort into a massive, and predictably traumatic, change of direction. The decision to take the risk was a synthesis of many ancillary decisions. But it was rooted chiefly in Beckman's estimate of the type of marketing effort that will be required by a rapidly changing technology.
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